Auto Detailing Liability Insurance

As I asked you in another section of the site, do you have garage keepers liability insurance? General liability alone won't cut it, you need garage keepers liability to cover the vehicle while in your care, custody and control. Ask your insurance agent about this.

If you are a potential detailing or tinting customer, one of the things you need to ask your shop for is their "certificate of insurance". This breaks down exactly what their coverage is in regards to the services they are performing for you. Reputable shops will have one right in the office they can either copy for you or fax to you. Many of our customers will simply ask us to fax them a copy before they bring their car down for service. Why are they looking for this?

Regardless of what kind of vehicle you have, you want to make sure it's protected while under the care, custody and control of the shop and it's employees;
If you have a more expensive vehicle you want to make sure their coverage exceeds the value of your car. For example, a $90,000 BMW 745Li owner would want to look for at least $100,000 in "Garage Keepers Liability Coverage". This means that the shop is covered regardless if they drive your car into a wall or the shop burns down while your car is in it;
General Liability will not cover your car! This is important. A lot of shops will try and get around having Garage Keepers Liability while simply carrying General Liability and telling their customers they are fully insured. They are not. General Liability covers your painter if he drops his ladder through your stained glass window, but he's not in control of your house when he does that damage. Garage Keepers Liability covers the shop while they are in the care, custody and control of your vehicle. There's an important difference. Most reputable shops carry both General and Garage Keepers Liability.
You want to call the insurance agent that is listed on the certificate and make sure the coverage is in force when you bring your car down to the shop. They will verify this for you over the phone. You can also ask them how long they've had the policy and whether or not they've had any claims. Sometimes the agent will tell you and sometimes they won't. They will at least tell you whether or not the policy is good.

So why is insurance so important from a shop owner perspective? Here's some things you may not have thought of. Did you know that while your customer's vehicle is in your care, custody and control (three C's, an insurance term), you are totally liable for that vehicle? One of the tricks small shop owners do is to simply use their personal auto insurance and think that they are somehow covered by this. Here's the rub with that idea. If there is an accident and your insurance carrier gets wind of the fact that you were driving somebody else's car while doing work on the car when the accident occurred and then you lied about it, you're screwed. Another problem is with "employees". Are you a small shop owner who pays his workers under the table? Or do you do the detailing industry standard operation of paying them by check and issuing a 1099 at the end of the year and calling them "independent contractors"? While I don't encourage anybody to pay under the table (government get's real testy about that if they catch you), considering them 1099 contractors and then letting them drive a customer's car will get you in hot water. If you do have garage keepers insurance, then your policy won't cover them if they are not considered an employee and get in an accident while working for you. Their personal insurance also won't cover it because they were driving the vehicle while working for you. You could be personally responsible for that accident with no insurance to cover you as backup, so be careful how you deal with and classify your workers. If you don't think that $10/hour employee will crack under pressure from an experienced insurance adjuster grilling them about the circumstances involving the accident, then you are in for a rude surprise.

Here's another thought on the 1099 Contractor in terms of insurance. Keep in mind when you are cutting those checks and telling the government that this person is a contractor of yours that they need to have their own insurance. Full liability and garage keepers liability. Your insurance covers you, your business and your employees, not your contractors. Again, check with your agent for an explanation here before you get in trouble down the road if you are doing this.

Speaking of 1099 contractors and employee's, check out our tax issues page for exact criteria regarding 1099 Contractors. Did you know that if they are driving their personal vehicle while working for you and they get in an accident, then your insurance is liable? If you aren't properly insured then you are, once again, screwed. You are not permitted under the terms of your personal insurance policy to use your personal vehicle for work. If the accident happens during business hours, the adjuster is going to ask why the employee was in either their car or your customer's car in the first place. Try getting your customer to lie for you to commit insurance fraud or to accept liability for an accident that goes against the customer's insurance policy. Especially when they probably thought you were properly insured.

Insurance is also tough when transporting cars. In Pennsylvania, we have these plates called "Transporter" plates. Detailers use them to transport cars between dealerships and their own shops. Even though technically they aren't supposed to do that. The only way you can get "transporter" plates is to convince a dealership to do a contract with you that says you will be transporting cars for them. The application specifically says that you can't be driving their cars between your shop and the dealership. So basically they don't want detailers moving cars and this is their way of making it hard on them. Mechanics shops have repair/towing plates. Dealers have dealers plates. Detailers don't have anything except this obscure plate that only auctions use to move cars back and forth. If you do get transporter plates you need to make sure you are insured with transport insurance on EACH and every plate you own. That will run you about $1,400 per plate. Plus the state makes you get the insurance BEFORE they even look at your application which is fun since it takes them over a month to process it.

The detailing business is like any other when it comes to being properly insured. The reason you have insurance is to make sure you are covered in the event something bad happens. So by cutting corners like many detail shop owners do, eventually you will get burned in some scenario that you might have thought sounded good but in reality just doesn't work.